TaXavvy Stay current. Be tax savvy.

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19 September 2016 Issue 8-2016 TaXavvy Stay current. Be tax savvy.

1 19 September 2016 Issue TaXavvy Stay current. Be tax savvy. Amendment to DESIRE Dialogue 1/2016 minutes Public Ruling 5/2016 Tax incentives for employers who provide child care centres Public Ruling 6/2016 Group relief for companies Guidelines on automatic double deduction for inhouse research & development project for SMEs

2 2 Amendment to DESIRE Dialogue 1/2016 minutes The IRB has issued an amendment to the minutes of the DESIRE Dialogue 1/2016, via their letter dated 9 August IRB s position on item 8 of Part A in the minutes, pertaining to the furnishing of an e-cp204 for a tax estimate of less than 85% of the previous year of assessment s (YA) tax estimate from YA 2018, is amended as follows: Previous position The taxpayer can submit a tax estimate of less than 85% of the previous YA s tax estimate, via e- CP204. Amended position To apply for a tax estimate of less than 85% of the previous YA, the taxpayer is required to submit: An e-cp204 (at 85% of the previous YA s tax estimate) A letter of appeal for the lower estimate, with supporting documents to the Pusat Pemprosesan Maklumat. 30 days before the commencement of the basis period. A copy of the minutes is available on IRB s website (Internal Links > Dialogue Minutes for Operational & Technical Issues). Public Ruling 5/2016 Tax incentives for employers who provide child care centres The IRB has issued Public Ruling 5/2016 Tax incentives for employers who provide child care centres ( PR 5/2016 ), dated 22 August 2016, to explain the tax incentives for employers who provide child care benefits. Key points to note are: Child care centre four or more children under the age of four years from more than one household are cared for a fee. registered with the Department of Social Welfare and subject to the Child Care Centre Act The incentives Further deduction for expenditure incurred on the provision and maintenance of child care centre for employees. Further deduction for child care allowance provided to employees. Industrial building allowance for the construction or purchase of child care facilities (10% annual allowance).

3 3 Public Ruling 6/2016 Group relief for companies The IRB has recently issued Public Ruling 6/2016 Group relief for companies ( PR 6/2016 ), dated 22 August PR 6/2016 sets out the circumstances and procedures for claiming group relief, including: Qualifying criteria for group relief Steps to determine if companies are related for purposes of group relief Computation of residual profits, residual assets and equity holders entitlement to residual profits and assets Timeframe for the IRB to raise additional assessment on the claimant company for incorrectly claiming group relief. Penalties for incorrect information Companies not eligible for group relief The salient points to note are: Timeframe for the IRB to raise additional assessment on the claimant company for incorrectly claiming group relief 1 Section 44A(9)(a) of the Income Tax Act 1967 allows the Director General (DG) to make an assessment or additional assessment within 5 years if it is discovered that the taxpayer had incorrectly claimed group relief. Para 11.1 of PR 6/2016 illustrates that the 5 year period provided in section 44A(9)(a) refers to 5 years from the year of assessment (YA) in which the discovery of the incorrect claim was made by the DG, and not the YA in which the incorrect group relief claim was made. Guidance on meaning of commercial loans (for computing residual profits) 2 The IRB provided further explanation on the general features of a commercial loan in para 6.3(a) of PR 6/2016. The IRB has also stated that the term borrowings would include any financial arrangements. As such, all financial transactions would be examined to determined if it constitutes a borrowing. Taxpayers are advised to keep records of their financial transactions for these purposes. Both PR 5/2016 and PR 6/2016 are available on IRB s website (Internal links > Public Rulings).

4 4 Guidelines on automatic double deduction for in-house research & development (R&D) project for SMEs Following the announcement made by the government in the 2016 Budget in relation to the automatic double deduction for in-house R&D projects for SMEs under Section 34A of the Income Tax Act 1967, the IRB has recently issued its guidelines on the matter. Qualifying person Company incorporated under the Companies Act 1965 and resident in Malaysia. Paid-up capital not exceeding RM2.5 million at the beginning of a basis period for a YA, but excludes companies where: 1) > 50% ordinary share capital is directly or indirectly owned by a related company*, or vice versa, or 2) > 50% ordinary share capital of the company and its related company* are owned, directly or indirectly by a third company. * Related company means a company with paid up capital of > RM2.5 million as at the beginning of a basis period for a YA. Automatic claim procedure The procedure to obtain approval for the R&D project remains the same, i.e. application for approval has to be made 6 months prior to the close of the financial year end. The above qualifying companies can automatically make the claim in the income tax return, during the incentive period, without having to wait for approval to be granted. However, the claim is still subject to IRB s audit and approval. Qualifying expenditure (QE) Expenditure incurred on carrying out inhouse R&D but excludes: i. Capital expenditure on plant, machinery, equipment, land or building, ii. Expenditure on permanent structures such as renovation, additions or expansion of existing permanent structures, or iii.expenditure on acquisition of rights, e.g. acquisition of technology, intellectual property, or royalty payments. Total QE incurred for each YA must not exceed RM50,000. Where the total QE incurred exceeds RM50,000 in a YA, the claimant is not eligible to make the automatic claim for that YA. Incentive period YA 2016, 2017 and The guideline is available on the IRB website (Internal Links > Technical Guidelines).

5 Let s talk Our offices Name Telephone Kuala Lumpur Jagdev Singh jagdev.singh@my.pwc.com +60(3) Penang / Ipoh Tony Chua tony.chua@my.pwc.com +60(4) Johor Bahru Benedict Francis benedict.francis@my.pwc.com +60(7) Melaka Teh Wee Hong Au Yong wee.hong.teh@my.pwc.com paik.hup.au@my.pwc.com +60(3) (6) Labuan Jennifer Chang jennifer.chang@my.pwc.com +60(3) Our services Name Telephone Corporate Tax Compliance & Planning Consumer & Industrial Product Services Margaret Lee Steve Chia margaret.lee.seet.cheng@my.pwc.com steve.chia.siang.hai@my.pwc.com +60(3) (3) Emerging Markets Fung Mei Lin mei.lin.fung@my.pwc.com +60(3) Energy, Utilities & Mining Lavindran Sandragasu lavindran.sandragasu@my.pwc.com +60(3) Financial Services Jennifer Chang jennifer.chang@my.pwc.com +60(3) Technology, InfoComm & Entertainment Heather Khoo heather.khoo@my.pwc.com +60(3) GST / Indirect Tax Raja Kumaran raja.kumaran@my.pwc.com +60(3) International Tax Services / Mergers and Acquisition Transfer Pricing, Tax Audits & Investigations Frances Po frances.po@my.pwc.com +60(3) Jagdev Singh jagdev.singh@my.pwc.com +60(3) International Assignment Services Sakaya Johns Rani Hilda Liow sakaya.johns.rani@my.pwc.com hilda.liow.wun.chee@my.pwc.com +60(3) (3) Corporate Services Lee Shuk Yee shuk.yee.lee@my.pwc.com +60(3) Japanese Business Consulting Yuichi Sugiyama Clifford Yap yuichi.sugiyama@my.pwc.com clifford.eng.hong.yap@my.pwc.com +60(3) (3) pwc.com/my TaXavvy is a newsletter issued by PricewaterhouseCoopers Taxation Services Sdn Bhd. Whilst every care has been taken in compiling this newsletter, we make no representations or warranty (expressed or implied) about the accuracy, suitability, reliability or completeness of the information for any purpose. PricewaterhouseCoopers Taxation Services Sdn Bhd, its employees and agents accept no liability, and disclaim all responsibility, for the consequences of anyone acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it. Recipients should not act upon it without seeking specific professional advice tailored to your circumstances, requirements or needs PricewaterhouseCoopers Taxation Services Sdn Bhd. All rights reserved. "PricewaterhouseCoopers" and/or "PwC" refers to the individual members of the PricewaterhouseCoopers organisation in Malaysia, each of which is a separate and independent legal entity. Please see for further details.

TaXavvy Stay current. Be tax savvy.

14 October 2016 Issue 9-2016 TaXavvy Stay current. Be tax savvy. Public Ruling 7/2016 Basis period for companies under www.pwc.com/my 2 Public Ruling 7/2016 for companies under IRB has issued Public Ruling